Should You Use a Credit Card for Your Holiday Purchase? (2024)

Holiday costs can quickly add up, which is why some people choose to pay for their travel, accommodation and other expenses on a credit card.

Credit cards can be a useful way to spread the cost of your holiday, and they may also be able to provide some level of protection if something goes wrong.

However, you should think carefully before using a credit card to pay for a holiday and consider the risks that may be involved.

Credit card protection

One of the benefits of paying for your holiday with a credit card is the protection you could get under Section 75 of the Consumer Credit Act.

What is Section 75?

Section 75 of the Consumer Credit Act offers additional protection if there’s a problem with any goods or services you purchased with a credit card (costing between £100 and £30,000). For example, this could be if a service provider goes bust or if some goods aren’t up to the standard you expect.

While your first port of call for a refund or compensation if something goes wrong should be the travel operator, airline or accommodation provider, if this doesn’t work out, you could be covered by your credit card provider.

For example, if your booking is cancelled or your travel provider goes bust, you may be able to claim your money back from your credit card provider, even if you only paid for the deposit by card and the rest of the balance in cash. This applies where the cost of the holiday you are buying is more than £100 but less than £30,000.

Any extra, unavoidable expenses, such as having to spend more on flights to get home, may also be covered.

You’ll only get protection from your credit card company if you booked your flights, accommodation or other service directly with a provider. If you book via a third-party agent that isn’t the direct provider, you may not qualify for protection.

Package holidays are protected under ABTA and ATOL schemes and may not always be covered under Section 75.

Bear in mind that, even though credit cards can offer additional protection, it’s still worth getting travel insurance so you’re fully covered for your trip away.

Should you pay for a holiday with a credit card?

It’s up to you whether you use a credit card to pay for your holiday. While the Section 75 protection offered by credit cards can be useful and you may prefer to spread the cost of your holiday over several months, you should only use a credit card if you’re confident about managing the repayments.

When deciding whether to pay for your holiday with a credit card, consider the following points:

• Find a credit card with a 0% period. 0% credit cards won’t charge interest for a specified number of months, so it won’t cost you any extra to use one to pay for your holiday. However, you still need to pay at least the minimum monthly payments and clear your balance in full before the end of the 0% period, otherwise charges could start piling up.
• Check the credit limit. Before paying for your holiday on your card, check that you won’t go near, or exceed, your credit limit. Using a large proportion of your available credit can affect your score and, if you go over your limit, you may be charged a fee as well.
• Make sure you can afford the repayments. Credit cards can tempt people to spend more than they can afford, but it’s important you don’t overspend. You need to work out how much you can afford to repay and not borrow any more than this. If you use a 0% credit card, set yourself a repayment plan to make sure you clear your balance before the interest-free period ends. Not having a plan to repay your credit card or missing payments puts you at risk of building up unmanageable debt.

Compare 0% purchase credit cards

Should you use a credit card while you’re on holiday?

You may choose to use a credit card to pay for food, transport, shopping and other holiday expenses while you’re away. But, as explained above, you should always make sure you manage your card responsibly and can afford to pay off your balance.

If you’re travelling abroad, you also need to consider any foreign transaction fees that may apply. If you want to use a card for your spending, it’s worth considering a specialist travel credit card that won’t charge any fees.

You could also consider using a prepaid travel card, which allows you to load a set amount of spending money on it. However, check for any fees these cards may charge.

Or, if you prefer, you can always exchange your money and take cash for your spending money, instead of using a card.

Take a look at our guide for more details on spending while you're abroad.

Alternatives

Credit cards aren’t the only way to pay for your holiday. You could also pay for your trip using your savings or a personal loan, for example.

Debit card

Paying for your holiday with cash (or using a debit card) means you won’t need to worry about debt or your credit score, unlike using a credit card.

The earlier you start saving, the more likely you are to be able to pay for your holiday outright. You can work out a budget to see how much your holiday is likely to cost and how much you can afford to save each month in a holiday fund, ready for when you book your next trip away.

You can compare savings accounts to find one that pays a competitive rate of interest, so you get the best possible return on your money.

Bear in mind that, unlike credit cards, debit cards don’t offer Section 75 protection. However, depending on the situation, you may be able to claim back money via chargeback if something goes wrong with your holiday plans.

Personal loan

A personal loan is another way you could spread the cost of your holiday in monthly instalments. However, because a personal loan will charge interest, it will be a more expensive option than paying for the holiday outright or by using a 0% interest credit card.

Before taking out a loan to pay for your holiday, compare the loans available to find the most affordable option. Bear in mind that, the longer the repayment term, the more you will pay in interest overall.

It’s also worth checking your eligibility for a loan before applying, so you can see your chances of approval without affecting your credit score. Crucially, always make sure you can afford the loan’s monthly repayments as your credit score may drop and you risk building up debt if you miss a payment.

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